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TNB Financial Report 2002
56
Notes to the Financial Statements (Continued)
– 31 August 2002
24. Borrowings (Continued)
10-year RM1,500.0 million Fixed Income Securities (‘FIS’) (continued)
• If the Company elects to declare and pay dividends on the RPS, payment of such dividends amounting to RM71.9 million per annum
(net of income tax) shall be on a six monthly basis non-cumulative. In addition, interest under the Bond Coupons amounting to RM0.2 million
per annum shall be payable. In the event that dividends on the RPS are not declared or paid, interest payable under the Bond Coupon
is RM94.5 million per annum payable semi-annually.
• The FIS are classified as debt instruments and hence are reported as liabilities. Accordingly, the annual net dividend payment of the
RPS amounting to RM71.9 million is classified as an interest expense, in the income statement.
• Under the terms of the FIS, if the holder of the RPS is unable to receive the related tax credits associated with the transaction, the Company
has to indemnify the holder of the RPS, in respect of the benefits denied and any penalties arising which the RPS holder may incur.
The FIS was issued in two tranches as follows:
(i)
Tranche 1 comprising 1,000 Bonds of an aggregate nominal value of RM999 million and 1,000 Class A RPS issued on 16 August 2001; and
(ii) Tranche 2 comprising 500 Bonds of an aggregate nominal value of RM499.5 million and 500 Class B RPS issued on 19 September 2001.
Amount due to Cagamas Berhad (‘Cagamas’)
The sale of Company’s conventional staff housing loans was based on the maturity profile of the loans outstanding and based on the Cagamas interest
rates effective from 21 February 2002. Under the Cagamas scheme, TNB’s employees whose housing loans have been sold to Cagamas will continue
to pay their monthly instalments through salary deduction where the interest on the loan is calculated at 4.0% per annum monthly rest. TNB will
then pay to Cagamas the monthly instalments deducted from the employee plus the difference between the Cagamas rate offered to TNB and the
4.0% per annum interest paid by the employee. Interest rates charged by Cagamas during the financial year ranged from 4.05% to 5.15%.
Other unsecured borrowings with hedging arrangements
(a)
10-YEAR JPY37 BILLION TERM LOAN
In 1997, the Company entered into a 10-year JPY37 billion unsecured loan, paying interest at floating rates, to mature on 30 June 2007. The
translated RM balance of the loan as at 31 August 2002 as per the Company’s accounting policy is RM595.7 million (2001: RM704.3 million).
This loan is an amortising loan, whose principal amount is payable in equal semi-annual instalments over the life of the loan. The repayments
commenced since 1997. The notional principals of the hedging contracts illustrated below amortise in the same manner as this loan.
Interest rate swap (‘IRS’)
On one tranche of the loan, the Company entered into an IRS agreement on 31 December 1997 that entitles it to receive floating interest
rates, and obliges it to pay interest at a fixed rate of 1.927% to mature on 30 June 2007. The notional principal of the swap is JPY8.6
billion. The effect of this transaction is to fix the interest rate payable on that tranche of the loan.
Interest rate collar and forward interest rate swap
On the remaining tranches of the loan, the Company has entered into interest rate collar, for the period from 30 June 1998 to 30 June
2002, with initial notional principals totalling JPY25.8 billion. The effect of these interest rate ‘collar’ arrangements is to limit interest rate
payable to a maximum rate but is subject to a minimum rate. There is also a ‘knock-out’ arrangement whereby if interest rates were to
set above a certain ‘knock-out’ level (which is above the maximum rate), then the maximum rate is ‘knocked-out’ and that actual interest
rate becomes due.
For the period from 1 July 2002 to 30 June 2007, the Company entered into IRS agreements that entitle it to receive interest at floating
rates on notional principals totalling JPY14.0 billion and oblige it to pay interest at fixed rates ranging from 2.74% to 2.94%.